No quick fix for equalization between provinces.

[Canuck E Stan]

David MacKinnon Remedy idea?

The problem, said Mr. Mac-Kinnon, is that Ontario pays for 45 per cent of the equalization system, which is hurting the province’s growth and its ability to offer services to its own citizens.

Mr. MacKinnon said Ontario’s contributions to transfer payments amount to 4.5 per cent of its gross provincial product, which is only growing by 1.5 to two per cent.

Mr. MacKinnon said there’s no quick fix for the situation, which requires better measurement mechanisms, but he suggested some remedies.

"It’s low corporate taxes, economical and manageable public services and a determination to avoid direct subsidies to businesses," he said, suggesting that the federal government could take on the debt and interest payments of provinces like Nova Scotia in lieu of equalization.

Valerie Payn, president of the Halifax Chamber of Commerce, said Mr. MacKinnon provided an interesting perspective on a complex and potentially explosive issue.

"It’s a real threat to our Canadian federation when you’re moving to a place where you’re having provinces looking at other provinces and making judgments," she said, adding that she thought his suggestion on the provincial debt warranted consideration. "Why not?"

Might be an option to consider.

[August1991]

This proposal wouldn't really change anything.

To make equalization payments, the federal government doesn't go to the Ontario provicial government and take money from its purse or bank account.

The federal government taxes people all across Canada. It then, through a complicated formula, gives some of these tax receipts to certain provincial governments, no strings attached.

If the federal government were to pay Nova Scotia's interest payments, that would be like earmarking funds. The federal government does that now through the Canada Health Transfer. In theory, this money is to be spent on health care but of course the transfer allows provincial governments to spend more elsewhere.

Equalization is a transfer scheme but it's particularly pernicious because we take money from people in one jurisdiction and give it to a government in another jurisdiction. Government transfer schemes should do as Robin Hood, take from rich people and give to poor people. Equalization doesn't do that. In fact, Canada's equalization scheme shows all the same problems as third world aid to African governments.

The best way to help poor people is not to give money to governments in poor countries (or poor provinces) - we should give money to poor people themselves.

----

To simplify, the economic justification for equalization (other than as a transfer scheme) is that it prevents people wastefully moving to Alberta merely to get the $400 resource cheque.

With all this in mind, here's a radical idea. Let's abolish equalization (that would require a Constitutional amendment). And then let the federal government impose different tax rates in different provinces. Albertans would pay higher federal taxes than Newfoundlanders. (This happens now to a degree since Quebecers pay a lower federal income tax than other Canadians.)

In this scheme, the transfer would go directly to individuals not to provincial governments. If a provincial government wanted extra funds to finance new programmes, it would only have to raise taxes on its own citizens.

[NovaScotian]

So they are suggesting that the federal government payoff provincial debts? I would be in favor of that. It would be expensive, but in the long run it would pay off. I believe that our interest payments on debt are about the same as equalization.

[scribblet]

The Atlantic Accords are a perversion of equalization, if the Liberals hadn't made all these side deals there wouldn't be a problem now.

[Canuck E Stan]

This proposal wouldn't really change anything.

With all this in mind, here's a radical idea. Let's abolish equalization (that would require a Constitutional amendment). And then let the federal government impose different tax rates in different provinces. Albertans would pay higher federal taxes than Newfoundlanders. (This happens now to a degree since Quebecers pay a lower federal income tax than other Canadians.)

In this scheme, the transfer would go directly to individuals not to provincial governments. If a provincial government wanted extra funds to finance new programmes, it would only have to raise taxes on its own citizens.

I see the provincial governments taxing the individual heavily in order to get it's money.

The point about the constitutional amendment to abolish equalization,

why isn't there a consitutional amendment required to give the Maritime provinces the rights to off shore resources.

Shouldn't all Canadians be represented and have a say in this Federal giveaway?

[geoffrey]

So they are suggesting that the federal government payoff provincial debts? I would be in favor of that. It would be expensive, but in the long run it would pay off. I believe that our interest payments on debt are about the same as equalization.

What do we get in Alberta for doing it ourselves?

[NovaScotian]

So they are suggesting that the federal government payoff provincial debts? I would be in favor of that. It would be expensive, but in the long run it would pay off. I believe that our interest payments on debt are about the same as equalization.

What do we get in Alberta for doing it ourselves?

A pat on the back for cutting spending, but really sitting on the worlds largest oil and gas deposit doesn't hurt either.

[Canuck E Stan]

So they are suggesting that the federal government payoff provincial debts? I would be in favor of that. It would be expensive, but in the long run it would pay off. I believe that our interest payments on debt are about the same as equalization.

What do we get in Alberta for doing it ourselves?

A pat on the back for cutting spending, but really sitting on the worlds largest oil and gas deposit doesn't hurt either.

And what's sitting in the ocean off the Maritimes besides seaweed?

[NovaScotian]

And what's sitting in the ocean off the Maritimes besides seaweed?

Newfoundland has about 2.7 billion barrels of oil offshore, Certainly enough to wipe its debt, but of course offshore is federal jurisdiction right?

Alberta has 175 billion barrels of oil and without it you have to admit the province would have never payed it off so fast. Its a given and no reason to deny it.

[noahbody]

Making health care efficient and lessening the need for equalization would be a good first step.

[Michael Bluth]

Alberta has 175 billion barrels of oil and without it you have to admit the province would have never payed it off so fast. Its a given and no reason to deny it.

Alberta would not have been a have provinces without the hard work and determination of Albertans.

Look at the downturns of the last 25 years. After the NEP and in the 90s. No other provinces were rushing to help Alberta then. But now that the money is coming in your hands are sure out in a hurry.

It's not as if the industry developed itself. Albertans turned their natural advantage to their favour.

Quebec makes tons of money off of hydro-electricity. They would have an even bigger debt and be even more of a have not province without that.

Ontario has been blessed with easy access to big markets in the U.S. Their miniscule surplus would be a huge deficit and they would be a have not province without that.

[Mad_Michael]

Mr. MacKinnon said there’s no quick fix for the situation, which requires better measurement mechanisms, but he suggested some remedies.

"It’s low corporate taxes, economical and manageable public services and a determination to avoid direct subsidies to businesses," he said, suggesting that the federal government could take on the debt and interest payments of provinces like Nova Scotia in lieu of equalization.

Interesting to note that Ontario and Alberta have the lowest corporate taxes, with economical and manageable public services and the least amount of subsidies to private business of all the provinces in Canada.

In other words, half the problem with the 'poor' Provincial governments is government incompetence in those Provinces with their noted passions for high corporate taxes and public services beyond their own means and high levels of political patronage and subsidies to private business. This fits the maritimes to a 't'.

Why should Alberta and Ontario taxpayers be forced to subsidize such ill-governance in a way that penalises themselves?

And wiping out provincial debts is the worst possible policy proscription since it creates a 'moral hazard' of govenment's getting out of responsibility for their own acts. They will then have every incentive to load up on debt and try to spend their way out of their problems with other poeple's money - again.

Might be an option to consider.

I'm sure the Maritime provinces would love it.

[Mad_Michael]

Newfoundland has about 2.7 billion barrels of oil offshore, Certainly enough to wipe its debt, but of course offshore is federal jurisdiction right?

Right - federal jurisdiction.

Alberta has 175 billion barrels of oil and without it you have to admit the province would have never payed it off so fast. Its a given and no reason to deny it.

However, Alberta has been rather well governed over the last twenty years or so. Their build up of tertiary manufacturing in Alberta is remarkable and a sign they are well governed in diversifying the economic base of Alberta with high wage manufacturing jobs. This makes a striking comparison with BC (for example) which has always been very badly governed and is being overtaken by Alberta. BC used to be a net-contributor to equalisation - now they are not. That is poor governance.

Likewise with Quebec. There is a Province that ought to be as rich as, or richer than Ontario. They have every advantage of Ontario plus the added benefit of the best sources of hydro-power in the country. Quebec, if it was well-governed, ought to be a net-contributor to equalisation. It is not and is entirely addicted to public subsidies.

I don't mind my tax dollars helping the unfortunate, but subsidising ill-governance is stupid and a major economic drag on the properous parts of the country.

[Canuck E Stan]

Alberta would not have been a have provinces without the hard work and determination of Albertans.

It appears some from the Atlantic provinces think they are responsible for the success of the west.

novanewsnow editorial

Few Canadians west of the Atlantic ever consider the immense contributions made by residents of Atlantic Canada to the “have” provinces. For many decades workers from the Atlantic provinces helped to build western cities and towns, and currently they make up a large proportion of the oil patch workforce in Alberta.

[Michael Bluth]

That's fine.

They get paid very well for doing at. And are able to send a lot of money back to the Atlantic provinces.

[Mad_Michael]

Alberta would not have been a have provinces without the hard work and determination of Albertans.

Look at the downturns of the last 25 years. After the NEP and in the 90s. No other provinces were rushing to help Alberta then. But now that the money is coming in your hands are sure out in a hurry.

You are conveniently forgetting all the equalisation payments that Alberta has received over the years - compliments of the Ontario taxpayers at the time.

And Alberta's 'cycles of downturns' are entirely a product of the oil resource they are so dependent upon, not any government act. The NEP didn't cause a recession in Canada or in Alberta.

It's not as if the industry developed itself. Albertans turned their natural advantage to their favour.

This is true. As I noted above, Alberta has been rather well governed lately and it shows in the extensive growth and development of tertiary manufacturing facilities.

Quebec makes tons of money off of hydro-electricity. They would have an even bigger debt and be even more of a have not province without that.

Actually, like Ontario, 90% of all debt in the Province of Quebec comes from the building of those hydro and nuclear power stations (and all the corruption and inefficiency Hydro Quebec and Ontario Hydro are famous for).

Ontario has been blessed with easy access to big markets in the U.S. Their miniscule surplus would be a huge deficit and they would be a have not province without that.

Quebec has equally good access to the big US markets and more resources than Ontario.

Yet Quebec is the number one receiver of equalisation payments in Canada and Ontario is the only Province in Canada to be a net-payer of equalisation payments for every year of existence. The difference between Ontario and Quebec can only be found in the quality and efficiency of governance in the two Provinces. Quebec has very high taxes, endless red tape and is addicted to subsidies for their favourite corporations. This harms the Quebec economy and turns it from prosperity to equalisation beggers.

[Michael Bluth]

You are conveniently forgetting all the equalisation payments that Alberta has received over the years - compliments of the Ontario taxpayers at the time.

And Alberta's 'cycles of downturns' are entirely a product of the oil resource they are so dependent upon, not any government act. The NEP didn't cause a recession in Canada or in Alberta.

Seven years. 1957 to 1964. Adjusting for inflation it is still less then Quebec receives in one year.

The NEP hugely magnified the effects of the recession that occured in the mid 80s.

A lot of the rigs that pulled up stakes and left would have stayed if not for the NEP.

It's not cheap to move a rig, but PET made it worth it for the oil companies.

[Mad_Michael]

Seven years. 1957 to 1964. Adjusting for inflation it is still less then Quebec receives in one year.

You are missing the early years starting 1904. Just because they didn't call it 'equalisation' then, doesn't mean the game wasn't being played.

My only point is that Alberta has benefited from equalisation, not that it is a basket case or receives them now.

The NEP hugely magnified the effects of the recession that occured in the mid 80s.

There was no recession in Canada during the mid-1980's. 1986 in fact marks the high point of the traditional cycle. Canada was in recession in 1981 and in 1991.

A lot of the rigs that pulled up stakes and left would have stayed if not for the NEP.

The greed of private corporations is legendary.

It's not cheap to move a rig, but PET made it worth it for the oil companies.

Good gosh this is silly.

How has Alberta's oil production been doing since 1980? I respectfully submit that oil output has been steadily increasing. Crocodile tears over the NEP is pathetic and makes Alberta sound like Quebec - a rich whiner (which is waaaaaaaaaay more annoying than the Maritimes traditional poor-whining).

Would you like to listen to Ontario whine about being poor and screwed by the country? I suspect it would annoy everyone for being trite and insulting.

[Michael Bluth]

Good gosh this is silly.

How has Alberta's oil production been doing since 1980? I respectfully submit that oil output has been steadily increasing. Crocodile tears over the NEP is pathetic and makes Alberta sound like Quebec - a rich (which is waaaaaaaaaay more annoying than the Maritimes traditional poor-whining).

Would you like to listen to Ontario whine about being poor and screwed by the country? I suspect it would annoy everyone for being trite and insulting.

Your language is trite and insulting. If you want to be respectful then do so.

A lot of the rigs that pulled up stakes and left would have stayed if not for the NEP.

The greed of private corporations is legendary.

So it was the greedy private corporations, and not the policies of Pierre Trudeau that exacerbated the early 80s recession in the oil patch? Should the Prime Minister of Canada have taken that into account? If he was trying to govern for all Canadians that is.

[Mad_Michael]

Your language is trite and insulting. If you want to be respectful then do so.

You are at least making it clear to me that you are unserious and unworthy of discussion.

I can't be (and won't be) bothered to reply to anything else you post.

[Michael Bluth]

You are at least making it clear to me that you are unserious and unworthy of discussion.

I can't be (and won't be) bothered to reply to anything else you post.

So much for a respectful submission on your part.

Unserious and unworthy of discussion?

For not agreeing with you? For taking offence to your trite and insulting language?

If you want a board where everybody will agree with your anti-business, pro-left agenda I suggest you try www.rabble.ca

I guess that market forces shouldn't be driving the development of our natural resources.

[August1991]

And wiping out provincial debts is the worst possible policy proscription since it creates a 'moral hazard' of govenment's getting out of responsibility for their own acts. They will then have every incentive to load up on debt and try to spend their way out of their problems with other poeple's money - again.

Equalization as it exists now already presents incentives for provincial governments to spend more money than they otherwise would - or as you put it, "government's getting out of responsibility for their own acts". The suggestion of covering provincial debts is an irrelevant detail.

The idea of moral hazard would apply if it were possible for, say, the Newfoundland government to go bankrupt. That's possible (it happened already) but highly unlikely.

Equalization simply creates the wrong incentives. It is like a welfare scheme where a person has no incentive to find a job because it's easier to receive a government cheque and the marginal tax rate is high on earned income.

To reach a bit further, all governments are in this situation since governments can tax or borrow any time they want. What incentive does Harper or Bush Jnr face to stop them spending money like a drunken sailor? (At the moment, federal government spending in both Canada and the US is rising faster than GDP growth.)

[Michael Bluth]

Equalization simply creates the wrong incentives. It is like a welfare scheme where a person has no incentive to find a job because it's easier to receive a government cheque and the marginal tax rate is high on earned income.

The sad thing is that is what happened with the budget.

If NS and NL can get more returns from their energy resources now, and manage it well, they will be better off then the guarantees of the equalization formula.

Casey et. al are complaining about an earlier end to the cutoffs.

I guess Harper approached it too much like a business man. We'll give you more money earlier. You can do better for yourself if you handle it well. Too bad that mentality doesn't hold political clout out in the Atlantic provinces.

[NovaScotian]

Mr. MacKinnon said there’s no quick fix for the situation, which requires better measurement mechanisms, but he suggested some remedies.

"It’s low corporate taxes, economical and manageable public services and a determination to avoid direct subsidies to businesses," he said, suggesting that the federal government could take on the debt and interest payments of provinces like Nova Scotia in lieu of equalization.

Interesting to note that Ontario and Alberta have the lowest corporate taxes, with economical and manageable public services and the least amount of subsidies to private business of all the provinces in Canada.

In other words, half the problem with the 'poor' Provincial governments is government incompetence in those Provinces with their noted passions for high corporate taxes and public services beyond their own means and high levels of political patronage and subsidies to private business. This fits the maritimes to a 't'.

Ontario has the lowest corporate tax rate? Ha, it has there highest in Canada at 42.2% and Alberta tax rate is about tied with New Brunswick. http://www.advisor.ca/news/article.jsp?con...620_154516_4576

Subsidies! What about the $16.6 billion to AECL or the numerous federal and provincial subsidies to auto and manufacturing. Or massive agriculture subsidies to agriculture and the oilsands? It should be known that the Atlantic region has the lowest subsidies to business in Canada per capita. I wish I could find the article my prof showed us.

The political economy in Canada is far from the mantra of low taxes, low subsidies = success. Equalization is only one way money is distributed around this country.

[Michael Bluth]

Subsidies! What about the $16.6 billion to AECL or the numerous federal and provincial subsidies to auto and manufacturing. Or massive agriculture subsidies to agriculture and the oilsands? It should be known that the Atlantic region has the lowest subsidies to business in Canada per capita. I wish I could find the article my prof showed us.

We wish you could too..